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Exclusionary provisions (primary boycotts)

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Overview

Note: The Harper Review Final Report recommended that the separate prohibition of exclusionary provisions contained in s 45 be repealed. Legislation was passed in October 2017 giving effect to this recommendation. View the Competition and Consumer (Competition Policy Reform) Act 2017.

The separate prohibition on exclusionary provisions in s 45 was effectively repealed on 6 November 2017.

History
Exclusionary provisions (boycotts) between competitors were, until 6 November 2017, prohibited per se by section 45 of the Act, and were defined in section 4D. This operated in addition to the cartel conduct provisions which might also capture many forms of exclusionary provisions caught by the definition in s 4D.

Section 45 prohibited making or entering into an agreement containing an exclusionary provision; 'exclusionary provision' is defined in section 4D.

Section 4D defined exclusionary provisions as occurring when parties (two ore more of whom are in competition) make a contract, arrangement or understanding in which the relevant provision has the purpose of 'preventing, restricting or limiting'

'(i)    the supply of goods or services to, or the acquisition of goods or services from, particular persons or classes of persons; or

(ii)   the supply of goods or services to, or the acquisition of goods or services from, particular persons or classes of persons in particular circumstances or on particular conditions'

by all or any of the parties.

It was a defence to the exclusionary provision prohibition to demonstrate that the provision was entered into for the purpose of a joint venture and it did not have the purpose, effect or likely effect of substantially lessening competition (s 76C).

Certain secondary boycotts remain the subject of prohibition (sections 45D-45DD).

Harper changes

Although the separate prohibition on exclusionary provisions was repealed on 6 November 2017 as a result of the Harper Reforms, the conduct that is currently caught by this prohibition (defined in s 4D) will still be subject to review under other provisions. For example, where it involves an agreement (or concerted practice) it can be considered under s 45 and prohibited where it has the purpose or effect of substantially lessening competition. In addition, much of the conduct may also be caught by the separate cartel laws; in particular, section 44ZZRD(3) dealing with output restrictions. To address any gap resulting from the repeal of the separate prohibition on exclusionary provisions, s 44ZZRD(3)(a) was broadened to include restrictions on acquisitions of goods or services.

The explanatory memorandum to the Competition and Consumer (Competition Policy Reform) Act 2017 states:

[para 4.4] Exclusionary provision is defined in section 4D, and broadly means a provision of an actual or proposed contract, arrangement or understanding between competitors, where the provision has the purpose of preventing, restricting or limiting supplies of goods and services to, or acquisitions from, particular persons or classes of persons.

...

[para 4.6] The prohibition on exclusionary provisions substantially overlaps with the prohibition on cartel provisions, particularly where a provision in a contract, arrangement or understanding between competitors has the purpose of:

  • restricting the actual or likely production of goods, supply of goods or services, or the capacity to supply services (i.e. output restriction) (paragraph 44ZZRD(3)(a)); or
  • allocating customers or geographical areas of supply or acquisition between the parties (i.e. market sharing or division) (paragraph 44ZZRD(3)(b).

[para 4.7] Where a provision has the purpose of output restriction or market sharing or division, that provision is likely to constitute both a cartel provision and an exclusionary provision.

[para 4.8] Section 45 contains a number of anti-overlap provisions which prevent the application of section 45 to conduct which contravenes one of several other provisions. However, there is no anti-overlap provision preventing the application of section 45 to conduct which contravenes the prohibition on cartel provisions.

[para 4.9] The Harper Review considered that this overlap is unnecessary and increases the complexity of the law, and recommended that the separate prohibition on exclusionary provisions be repealed, with an amendment to the provisions on cartel conduct to address any resulting gap in the law.

 

Historical: the legislation (until 6 November 2017)

Please see separate cartel page (in particular 'output restrictions') for current coverage of conduct previously captured as a prohibited exclusionary provision.

Part IV Restrictive Trade Practices
Division 2 Other provisions

The core prohibitions

Until 6 November 2017 section 45 stated (in part):

(2) A corporation shall not:

(a) make a contract or arrangement, or arrive at an understanding, if:

(i) the proposed contract, arrangement or understanding contains an exclusionary provision; or

...

(b) give effect to a provision of a contract, arrangement or understanding, whether the contract or arrangement was made, or the understanding was arrived at, before or after the commencement of this section, if that provision:

(i) is an exclusionary provision; or

Exclusionary provision

Until repealed on 6 November 2017 exclusionary provision was defined in s 4D as follows:

(1) A provision of a contract, arrangement or understanding, or of a proposed contract, arrangement or understanding, shall be taken to be an exclusionary provision for the purposes of this Act if:

(a) the contract or arrangement was made, or the understanding was arrived at, or the proposed contract or arrangement is to be made, or the proposed understanding is to be arrived at, between persons any 2 or more of whom are competitive with each other; and

(b) the provision has the purpose of preventing, restricting or limiting:

(i) the supply of goods or services to, or the acquisition of goods or services from, particular persons or classes of persons; or

(ii) the supply of goods or services to, or the acquisition of goods or services from, particular persons or classes of persons in particular circumstances or on particular conditions;

by all or any of the parties to the contract, arrangement or understanding or of the proposed parties to the proposed contract, arrangement or understanding or, if a party or proposed party is a body corporate, by a body corporate that is related to the body corporate.

(2) A person shall be deemed to be competitive with another person for the purposes of subsection (1) if, and only if, the first-mentioned person or a body corporate that is related to that person is, or is likely to be, or, but for the provision of any contract, arrangement or understanding or of any proposed contract, arrangement or understanding, would be, or would be likely to be, in competition with the other person, or with a body corporate that is related to the other person, in relation to the supply or acquisition of all or any of the goods or services to which the relevant provision of the contract, arrangement or understanding or of the proposed contract, arrangement or understanding relates.

Defence

76C Defence to proceedings relating to exclusionary provisions

 

Authorisation and notification

Authorisation (on public benefit grounds) was possible for exclusionary provisions prohibited by s 45.

 

Cases

Links to some of the key cases relating to exclusionary provisions in Australia are provided below. Although the provision has been repealed, they remain relevant for section 45 generally and/or the cartel provisions.

High Court cases

Rugby

News Ltd v South Sydney District Rugby League Football Club Ltd [2003] HCA 45
Deals with s 45's prohibition of exclusionary provisions in relation to South Sydney's exclusion from the national rugby competition in 2000.

 

Newspapers

Rural Press Ltd v ACCC [2003] HCA 75 (High Court) (threat to compete if competitor did not withdraw)
Threats if competition not withdrawn - not taking advantage of market power (no breach of s 46)

Substantial market power and requisite purpose by not taking advantage of market power (taking advantage of 'financial' power)

If a firm with market power has a purpose of protecting it, and a choice of methods by which to do so, one of which involves power distinct from the market power and one of which does not, choice of the method distinct from the market power will prevent a contravention of s 46(1) from occurring even if choice of the other method will entail it." (Justices Gummow, Hayne and Heydon)

What gave those threats significance was something distinct from market power, namely their material and organisational assets (Justices Gummow, Hayne and Heydon)

 

Recycle paper

Visy Paper Pty Ltd v ACCC [2003] HCA 59
Sectison 45 and 47 - anti-overlap

 

 

Federal Court (Full bench) (chronological)

Rugby

News Ltd v Australian Rugby League Ltd (No 2) (1996) 64 FCR 410 (4 October 1996) (Superleague)
Exclusionary provisions

[Special leave to appeal to the High Court refused]

 

Federal Court

Cricket

Hughes v Western Australian Cricket Association (Inc) (1986) 19 FCR 10
Exclusionary provisions - definition of corporation

 

 

History of the provision

HistoryHarper changes

Although the separate prohibition on exclusionary provisions were repealed, the conduct that is currently caught by this prohibition (defined in s 4D) will still be subject to review under other provisions. For example, where it involves an agreement (or concerted practice) it can be considered under s 45 and prohibited where it has the purpose or effect of substantially lessening competition. In addition, much of the conduct may also be caught by the separate cartel laws; in particular, section 44ZZRD(3) dealing with output restrictions. To address any gap resulting from the repeal of the separate prohibition on exclusionary provisions, s 44ZZRD(3)(a) was broadened to include restrictions on acquisitions of goods or services.

The explanatory memorandum to the Competition and Consumer (Competition Policy Reform) Act 2017 states:

[para 4.4] Exclusionary provision is defined in section 4D, and broadly means a provision of an actual or proposed contract, arrangement or understanding between competitors, where the provision has the purpose of preventing, restricting or limiting supplies of goods and services to, or acquisitions from, particular persons or classes of persons.

...

[para 4.6] The prohibition on exclusionary provisions substantially overlaps with the prohibition on cartel provisions, particularly where a provision in a contract, arrangement or understanding between competitors has the purpose of:

  • restricting the actual or likely production of goods, supply of goods or services, or the capacity to supply services (i.e. output restriction) (paragraph 44ZZRD(3)(a)); or
  • allocating customers or geographical areas of supply or acquisition between the parties (i.e. market sharing or division) (paragraph 44ZZRD(3)(b).

[para 4.7] Where a provision has the purpose of output restriction or market sharing or division, that provision is likely to constitute both a cartel provision and an exclusionary provision.

[para 4.8] Section 45 contains a number of anti-overlap provisions which prevent the application of section 45 to conduct which contravenes one of several other provisions. However, there is no anti-overlap provision preventing the application of section 45 to conduct which contravenes the prohibition on cartel provisions.

[para 4.9] The Harper Review considered that this overlap is unnecessary and increases the complexity of the law, and recommended that the separate prohibition on exclusionary provisions be repealed, with an amendment to the provisions on cartel conduct to address any resulting gap in the law.

 

Reports

There have been a number of reports dealing with exclusionary provisions.

Most recently, the Harper Report (2014-2015) (recommendation 28) recommended the prohibition be repealed.

See generally the main reports page.

 

Reading

For research and commentary on exclusionary provisions in Australia see the reading room.